Mark “Murch” Erhardt and Mike Schmidt are joined by Gloria Zhao, Robin Linus, Dave Harding, and Pavlenex to discuss Newsletter #257.

The Bitcoin Optech Podcast and transcription content is licensed Creative Commons CC BY-SA 2.0


  • Preventing coinjoin pinning with v3 transaction relay (16:08)

  • Speculatively using hoped-for consensus changes (1:33)

Waiting for confirmation #7: Network Resources (24:46)

Selected Q&A from Bitcoin Stack Exchange

  • Why do Bitcoin nodes accept blocks that have so many excluded transactions? (57:38)

  • Why does everyone say that soft forks restrict the existing ruleset? (1:05:28)

  • Why is the default LN channel limit set to 16777215 sats? (1:07:47)

  • Why does Bitcoin Core use ancestor score instead of just ancestor fee rate to select transactions? (1:10:28)

  • How does Lightning multipart payments (MPP) protocol define the amounts per part? (1:14:15)

Releases and release candidates

Notable code and documentation changes


Mike Schmidt: Welcome everybody to Bitcoin Optech Newsletter #257 Recap on Twitter Spaces. It’s Thursday, June 29th, and we’re joined hopefully later by Greg Sanders to talk about coinjoin pinning and v3 transaction relay, we have Robin Linus here to talk about sidechains and speculative consensus upgrades, Murch and Gloria to talk about policy and protecting network resources. We have five questions from the Stack Exchange, a BTCPay Server 1.10.3 release, a bunch of LN-related PRs. So, let’s go through some introductions and we’ll jump into it. I’m Mike Schmidt, contributor at Optech and Executive Director at Brink, where we fund Bitcoin open-source developers. Murch?

Mark Erhardt: Hi, I’m Murch, I work at Chaincode Labs on Bitcoin stuff, and we recorded two great episodes that are coming out shortly at the Chaincode podcast!

Mike Schmidt: Excellent. Gloria?

Gloria Zhao: Hi, I’m Gloria, I work on Bitcoin Core, and I’m sponsored by Brink.

Mike Schmidt: Hey, Robin, who are you?

Robin Linus: Hi, I’m Robin, I work on ZeroSync. We are applying Zero-Knowledge Proofs (ZKPs) to Bitcoin.

Mike Schmidt: Excellent. Well, I’ve shared a few tweets in the Space so folks can follow along. We also have the website version of the newsletter if you care to pull it up; it’s #257. And, since Greg may be joining us, I want to stall for him and maybe we can go a little bit out of order.

Speculatively using hoped-for consensus changes

Robin, we can talk about your news item first, which is speculatively using hoped-for consensus changes. And, Robin, maybe to set the context a bit, it sounds like this is a similar idea to Spacechains, and that there are BTC that are sent to some destination for purposes of being used on a sidechain, but whereas in spacechains those BTC are burned and no longer spendable on the mainchain, the idea with this Some Day Peg idea is that coins aren’t burned, but sent to a long timeout output.

In the example, I think it was 20 years’ locktime that would be spendable by anyone after that timelock, but there’s an additional spending condition that could spend the coins before that timelock if you satisfy a Bitcoin script fragment using opcodes with semantics that aren’t currently defined in consensus. And the example given, I think, was a script that used a reserved opcode speculatively as an OP_ZKP opcode. Am I getting that right; and maybe you want to fill in some of the holes there?

Robin Linus: Yeah, exactly. First of all, I have to clarify, it’s not only my idea. I was hanging out with Burak and Super Testnet, and we were just talking about Bitcoin and joking about things. And during that, Burak came up with the idea that we might use an opcode that doesn’t yet exist, or that doesn’t exist yet. And, yeah, the idea was based on Ruben Somsen’s perpetual one-way peg, which as you described, basically just burns bitcoin to mint some other coins, some sidechain coins. And, yeah, people opposed it a lot. Nobody likes the idea of burning bitcoins, apparently.

So we thought how to improve it, and the idea is that we could have someday a ZKP verifier that would allow us to do trustless two-way pegs. And since we don’t have that yet, we could just pretend that we already have it and make people use it even before it exists. If people use it, then they also have an incentive to lobby for actually activating this software that would be required, and the more people use it, the higher the incentive of the community to actually activate it.

Mark Erhardt: Well, the incentive for them to lobby for it, not necessarily for the community, because lost coins just increase the scarcity of all other coins, right?

Robin Linus: Oh, true, yeah, but here the coins wouldn’t get lost. Actually, yeah, they would be given to miners if the software would not get activated.

Mike Schmidt: So, you’re incentivizing the users of the coins on the sidechain who could potentially redeem it to activate, but you’re also simultaneously incentivizing miners then to not activate it, because they could scramble for these coins?

Robin Linus: Well, actually, miners do have an incentive to activate it too, because of course they could just steal the coins, but the problem is every miner could steal the coins. And if enough coins are locked and if all timelocks open at the same block height, then miners would have an incentive forever to overwrite that block and to fork and to give the coins to themselves. That would create huge chaos and it’s kind of an even better incentive for the community to actually activate it.

Mark Erhardt: Catching up to your thought process here, that sounds more like a very dangerous precedent and maybe an incentive for the community to change the outcome so that the miners will not be able to claim those funds.

Robin Linus: Yeah. To be absolutely upfront, I am not very serious about this proposal. I think it’s very funny and I think it’s worth exploring this idea and thinking about this idea, but neither Burak nor Super Testnet nor I are very convinced of this idea. We do see that it’s very problematic, in particular from the political perspective, because the incentives of it are super-strange.

Mark Erhardt: Yeah, I agree. I was reminded yesterday again how it’s important to keep an open mind and look at things in two or three different ways before you dismiss them.

Robin Linus: The interesting idea here is that it’s mostly a political solution, right, it’s not a technical solution. The technical solution is basically postponed to some point in the future. It’s more like an incentive structure, I would say. And if it works out, I don’t know, but there are incentives to do that, and that’s kind of interesting, I think.

Mike Schmidt: And the mechanism here is repurposing a reserved opcode for potentially, for example, the ZKP, repurposing that as an OP_ZKP opcode. And I think we’ve talked a little bit recently, in recent Spaces here, I think with Joost and others, about trying to preserve those reserved opcodes so that they’re not used today and that they can be preserved for future use. Whereas this would be, I guess, you could in theory be doing something like this sooner than later.

Robin Linus: Yeah. I would not be certain how to implement this actually, because we would have to find consensus on some kind of ZKP verifier. And as far as I understand the industry, there is no verifier that you could just take off the shelf and you’re good. It’s not the same situation as when Satoshi invented Bitcoin that he knew, well, we have the signature schemes and they have been out there for years and we can just use them. I think he just chose some of OpenSSL that he thought is reasonably good. And I think we don’t have that situation yet in the field of ZKP, so it wouldn’t be easy to choose a particular verifier right now. But we would have to choose one.

Mike Schmidt: Would you need to choose one before, because really all you need is which opcode you want to repurpose, and then I think in the example, there’s just some sort of a hash, right, and so however that would be implemented could be determined at a future date, right?

Robin Linus: Yeah, we thought so originally, but the more I thought about it, the more I thought it’s probably not true. First of all the question is, how specific do we want that opcode to be? Should it be generic OP_ZKP_VERIFY, or should it be only for a particular thing, which could be like a two-way peg or so? If we would say we want something very specific for only a particular two-way peg, then it wouldn’t be necessary to define all the details right now, because we could figure them out later and just adapt them such that they fit our use case later on.

But if we want to have generic ZKP verifier, then yeah, we have to define the specifics of it up front before we can use it, because otherwise what we do will be incompatible with the ZKP verifier we can be verifier. You mentioned the program – sorry?

Mike Schmidt: Sorry, go ahead, Robin.

Robin Linus: Yeah, I don’t want to talk too much like I’m happy if you give feedback in between because I don’t know if I’m making sense or not.

Mike Schmidt: I was just curious if Murch or Gloria had any comments or feedback on the proposal.

Mark Erhardt: I think that it’s the game theory and incentives around what happens, depending on how much money is used with this opcode, and how that might affect the dynamics of whether or not this is getting implemented. There’s a few too many open variables there for me to… My first reaction is that I’m not very comfortable with the idea!

Robin Linus: I’m not sure if I like it or if I hate it!

Mike Schmidt: Dave, do you have a comment?

Dave Harding: I just wanted to maybe correct something that Mike said in the introduction, which was, he said that if we define the opcode, like we make a consensus chain to define the opcode, we could start using this thing right away. I think maybe that’s confusing two different things, which is, one, if this was done, if we would take this risk, they could start sending money to say a sidechain that used this right away, but there’s no way that I can think of that they would be able to withdraw money from that sidechain in less than whatever the period of time was. So, Linus suggested 20 years; there’s just no way to allow a withdrawal in less than 20 years, even if next year we defined an OP_ZKP_VERIFY opcode. So it’s just you’re really committed to this if you’re willing to take that risk.

Robin Linus: Well, you can always use atomic swaps if you find someone who wants to swap in.

Dave Harding: That’s fair. But I’m just saying, the set of funds committed to the sidechain, it’s stuck there for 20 years. There’s no way for that pool to get any smaller in less than 20 years, even if we, as a community, change the consensus rules to support the feature that was being proposed.

Mike Schmidt: You’re right, Dave. I guess I misunderstood that. I thought that there was sort of a conditional there that was either the ZKP thing activates and you can withdraw before, or anybody can grab it after the timelock. So, I may have misunderstood that.

Robin Linus: I guess in theory it would be possible to implement it such that you can use it right away as soon as it gets activated. But I guess that would require a hard fork and not a soft fork.

Dave Harding: Yeah, I agree. I spent a fair amount of time while writing this trying to think of a way around that which I think it would be more appealing, if there was a way to pull those funds back into Bitcoin early. But I just couldn’t see a way to do that with just a soft fork.

Robin Linus: Yeah, with a soft fork, I think it’s impossible, but with a hard fork, it should be possible. You just need like the opposite of an OP_NOP; you need something that currently fails, and then after the hard fork, it succeeds. Then it would be possible.

Dave Harding: No argument from me.

Mike Schmidt: Murch, anything else before we move on?

Mark Erhardt: I’ll just play the grouchy old man here and say, if you’re banking your money on hard forking to get new speculative features, I think you’d better be ready to have signed them off!

Robin Linus: I mean, we just tried to be better than burning, right? So this is a slight improvement over burning your BTC.

Gloria Zhao: I kind of had a thought about using this as a general speculation on consensus changes. I think there’s two scenarios that are my absolute worst nightmare, one of which is two people create conflicting opcodes, for example, and then you put money into that, and then suddenly it’s like, okay, now we have to decide whose money to burn. And that’s not something that I think we can – that makes me very uncomfortable, as Murch said. And the other one is it’s kind of almost a negative bug bounty, where if you’re in a situation where you found a heinous bug that would allow you to steal anyone’s money that used this opcode, you’re almost disincentivized to reveal that, because what you really want is for the soft fork to happen so that you now get all that money, which is already locked up for you conveniently. I don’t know, maybe I’m simplifying it too much or thinking the worst case, but that’s kind of my grumpy-old-man thoughts about this.

But you know, I interpret a lot of things sometimes as just like a general push where like, “Hey, we really need to figure out how we get rough consensus and discuss soft fork proposals”. So, I think it’s good for that kind of thought-provoking kind of thing.

Mike Schmidt: Robin, thanks for joining us. You’re welcome to stay on and comment on the rest of the newsletter. Otherwise, if you have other things to do, you’re free to drop.

Robin Linus: Yeah, thanks for having me.

Preventing coinjoin pinning with v3 transaction relay

Mike Schmidt: Absolutely. So, I think we’ll go back to the first item of the newsletter, and I’m hoping between Murch, Gloria, maybe Harding and myself, we can go through this. Luckily, the author of the v3 transaction relay rules proposal is here to help. Maybe I can lob a softball to Murch here to start this discussion, which is the discussion of preventing coinjoin pinning with v3 transaction relay, which is a mailing list post that Greg Sanders sent to the Bitcoin-Dev mailing list. Murch, I suspect you can handle this one. Maybe we can explain how a participant in a collaborative coinjoin transaction could today prevent that coinjoin transaction from confirming; and then after that, we can get into what part of the v3 transaction relay proposal assists in the remediation of that kind of attack.

Mark Erhardt: Sure, I can try to give it a stab, but Greg just told me that he’d be here so I didn’t read much up on it! Anyway, the general problem here is that when multiple parties are trying to build the transaction together and there is more than one contributor that submits UTXOs to it, they can of course always build more transactions that also use the same UTXO. And, while the coordination for the coinjoin is ongoing, where they first must tell each other what inputs they’re using, somebody builds probably a PSBT and maybe some people are starting to sign it, they could still submit a second transaction that spends the same UTXO. And depending on whether or not replaceability has been set on that second transaction, it might prevent the coinjoin transaction after it’s signed to get accepted to mempools because there is already a conflicting transaction in the mempools.

So, I think there’s the obvious case where that transaction is just there and there’s a conflict and everybody knows that the coinjoin transaction was not accepted to mempools because of the conflict, but there is also a way in which that can be done that it’s not – sorry, if the other coinjoin participants have already submitted the transaction to their own mempools and the transaction by the attacker is already submitted to many other mempools on the network, then they might come into a situation where none of the two transactions can replace the other one, and the other participants in the coinjoin don’t realize that there is a competing transaction in other people’s mempools, and they could get stuck and be waiting for a long time. I think, Dave or Gloria, did I get that roughly right?

Mike Schmidt: Thumbs up from Dave.

Mark Erhardt: Okay, so the idea here is now as a solution, you could just stage the funds just in quotes, even the original source material, because if the funds are already sent to an address, or I should say an output, that is controlled by all participants of the coinjoin, then of course the funds cannot be double spent because they are already controlled by the coinjoining participants. And the idea is here each participant, in order to sign up for the coinjoin, first sends the funds to the coinjoin conglomerate, and then when the funds are confirmed, they only try to perform the coinjoin. And then of course there’s a fallback path when it times out, it goes back to the participant, pretty much like how when we open a channel or a Hash Time Locked Contract (HTLC), we have the two paths where we get to reclaim our funds after it times out.

Mike Schmidt: Okay, Murch, that makes sense to me. I think the part that I didn’t understand in reading through this is, where does v3 come in in any of that? I understand that there’s this staging step that would help mitigate the pinning, I’m unsure where the v3 part comes in.

Gloria Zhao: I think it’s because – well, maybe I shouldn’t have unmuted my mic. But my understanding was that if the staging transaction is v3, then it forces the next transaction to be v3 if it’s still unconfirmed. But then I was wondering if all the staging transactions are separate transactions, or if that’s all one transaction. But yeah, that’s my understanding, that you’re doing the forced inherited signaling, but I don’t know.

Dave Harding: So as I understood the proposal, all the staging transactions are separate transactions. They’re all deposited to the same scripts basically, but they’re all separate transactions and they need to be confirmed before the coinjoin starts. So, that was actually going to be also my question for Greg when he was here was, does this actually require v3? Because it seems to me like this works without v3.

I guess the downside of this proposal is this is just more heavy on the chain than existing coinjoins. And it’s especially, I think, I don’t want to say problematic, but it’s especially heavy if we consider what we want for coinjoins, which is we want them to be using in the future, if we have signature aggregation, cross-input signature aggregation; it’s going to be especially heavy if we have to go through this process to avoid pinning of coinjoins. So, I personally didn’t see this as a really great solution, but it is a solution if pinning of coinjoins is becoming a major problem.

Mark Erhardt: Especially if we consider that coinjoins might be performed in order to increase privacy by mixing up clusters between multiple wallets, then having this step in between where everybody pays to the same script before is such a huge fingerprint that it at least would make that case completely absurd.

Dave Harding: Yeah, I think looking at Greg’s proposal, he covered both the cases of what we currently have is implemented by JoinMarket, where the coinjoins are between a small group of peers, and the cases that we have, like in Wasabi and Whirlpool, where the coinjoins are kind of coordinated by a central coordinator. And so, in the central coordinated coinjoins, I think his proposal is a lot more efficient and useful. But again, like Murch said, there’s a fingerprinting vector there that, I don’t know, I guess I think it exists currently with coinjoins. They kind of look like they might be consolidation transactions maybe, but I think they’re pretty onchain fingerprintable right now.

Mark Erhardt: Actually, I realize where I’m going wrong with this. So, I think the way JoinMarket and Wasabi and other bigger coinjoin proposals work is that it’s fairly obvious that a coinjoin is happening, but the outputs gain privacy because they become unassignable to the original entrants of the coinjoin. So, you’re creating an anonymity set by saying, “Yeah, sure, we all paid into this pot, but now you can’t tell anymore whose output each one was when they came out of the coinjoin”. And therefore, I think maybe the fingerprint going into the coinjoin is not that bad, because people are already pretty open about being in the coinjoin, but you still get the benefits of the outcome.

Gloria Zhao: I have a question, it’s a really dumb question. Is ANYONECANPAY (ACP) used in this regime, because I’ve just noticed that it’s a quote text of, “Circling back to my ACP point,…”?

Dave Harding: Not so far as I know.

Gloria Zhao: Okay.

Mark Erhardt: I have no idea.

Mike Schmidt: Should we wrap it up, Murch? All right.

Waiting for confirmation #7: Network Resources

Well, next item from the newsletter continues our tech series on transaction relay and mempool policy, titled Waiting for confirmation. In a previous post, we outlined some considerations around using policy to protect a node’s resources. And in this post, we’re talking about protecting network resources. So, maybe to start, Gloria or Murch, whoever feels comfortable, maybe we can outline some examples of what are Bitcoin’s network resources in the way that we’re thinking about it in this post?

Mark Erhardt: Well, how about I just start because I wrote most of this. So, some of the network resources that we’re trying to protect in the Bitcoin network are of course just the overall blockchain size, the UTXO set as a representative of the current state of the network, and we want to protect the upgrade hooks. So, we have a bunch of mechanisms still in place that are currently allowed by consensus to be used, but in policy protected in order to have a smooth upgrade path for later soft forks and protocol changes. So, those are the three that come to mind.

Mike Schmidt: And then, Murch, I think we outlined in the protecting of the individual node resources some examples of how those particular resources are protected. And so I guess in this case, how are we protecting those three different kinds of resources that you’ve outlined?

Mark Erhardt: Yeah, so, sorry, I’m blanking pretty hard right now! Gloria, do you want to jump in?

Gloria Zhao: Yeah, I mean the general theme is, yeah, we have standardness rules to just stop things, or put a price on things that we consider taking up various network resources. I think one of the best examples in here is about adding arbitrary data into the blockchain, and how – the blockchain is this highly replicated perpetual storage that you can get tens of thousands of people to store forever for you. And so, of course, there’s going to be demand for that. And then I think recently, there’s been lots of – we generally in Bitcoin, I think we have a kind of culture of like, “Oh, yeah, protect network resources, keep UTXO sets small, keep blockchain size small, so that new nodes can bootstrap”, and we keep the cost of running a node small and it’s feasible to do it on a Raspberry Pi, etc.

So, for example, with people putting jpegs or putting any kind of arbitrary data into their transactions, people feel that that needs to be stopped. They’re like, “Oh, yeah, maybe add a rule to prevent ‘arbitrary useless wasteful data’ in transactions, because we have lots of standardness rules right now that are already censoring”. And my take on that is, as protocol developers, I don’t think we have a place in saying what is legitimate payment and what is legitimate data to stuff into the blockchain, and what is wasteful or not real payments. I think that goes against the whole philosophy of Bitcoin. But for example, this idea of pushing arbitrary data on chain, there are various costs associated with that.

So I think, again, the best example in here is talking about putting it into a bare multisig versus putting it into an OP_RETURN. I think the introduction of a single OP_RETURN “null data” or “data carrier” output was made standard as a way where it’s like, “Okay, we’re not going to tell you that this arbitrary data is useful or not useful or meaningful or not meaningful, but if you’re going to do it, put it in an OP_RETURN so that we don’t have to put it in the UTXO set”, for example. So, I think that’s the best one that I would point to within the article. Murch has something to say, so I’ll hand the mic back to you.

Mark Erhardt: Yeah, so I think people realize that it is impossible to prevent people from publishing data on the blockchain. And as Gloria already mentioned, it is very attractive to have at least a few small pieces of data in the blockchain where it will essentially live forever. And when you cannot prevent people from doing that, we can at least maybe encourage some best practices where we get people, if they need to do it, to do it in a way that it doesn’t pollute the UTXO set, doesn’t live in this piece of state that we have to keep around forever because we use it to validate transactions, to validate blocks.

So, yeah, we introduced OP_RETURN outputs to basically have a path to cater to this need without encouraging the worse ways of doing that. And so, in a way, the resurgence of the stamps recently is really unfortunate because bare multisig was essentially completely unused, and when people then say, “Oh, yeah, we do actively want to publish to the UTXO set rather than just a blockchain”, so people have to keep it forever in the active data rather than just a blockchain, that sounds a little counter to how we would like people to behave on the network. Given that we have this huge global state, it’s essentially like if you have a class of students and you’re making every student correct every other student’s homework, you’re probably going to get a few people that are very stringent about it and find every mistake, but it’s also a lot of replicated work. And that’s what we’re doing with the blockchain. Every single node is looking at every other single node’s submissions to the network. So, we want to keep that small in order to scale up.

We embody a lot of the goals for our network in the way the network is constructed and the peer-to-peer nature of it. If we allow people to just waste network resources, we will not be able to run nodes at home easily. We will make it more expensive and less accessible, we will reduce the number of entities that need to be convinced, coerced, or blocked to get undue influence on the network; so, yeah, philosophically we want the cost of running a node to be as small as possible so that we get a widespread, diverse set of node operators so that there’s a lot of people that check each other’s homework. So, the post here is mostly about that, how we can use policy in lieu of consensus rules to encourage best practices, to encourage social behavior, where people maybe take themselves back a little bit in order for the whole network to be able to exist in its current form to keep censorship-resistance and our leaderless configuration of the network alive.

Mike Schmidt: Gloria, any further comments before we wrap up this section?

Gloria Zhao: Yeah, the biggest theme I wanted to get across was essentially, we have no business censoring transactions on the basis of use case, but on the basis of what network resources we’re trying to protect and are critical to all of these ideological goals, we have; I think like policies is a great way to do that. And I think one thing that we didn’t mention actually in any of these posts was sometimes policy is a way to add a rule to the network that really should be consensus. But it looks like Harding has his hand raised.

Dave Harding: So, I kind of want to disagree with Gloria on this, I’m sorry, Gloria. But I think maybe we do have a good reason to make decisions based on use case. So, as a node operator, I’m willing to serve data, even if the government doesn’t want me to serve that data, in order to help protect other people’s ability to use free money, which is what I think of Bitcoin as; free as in a sense of freedom money. On the other hand, I’m not necessarily willing to run a node and to put my freedom at risk if I disagree with the government in order to serve other people’s data, especially if that data is, let’s say, breaking copyright law, or let’s say that data is child pornography. And that’s the kind of arbitrary data that some people want to store in the blockchain.

Now, other people want to store other sorts of arbitrary data. For example, we had a user on here a few weeks ago talking about using the annex to store data-related bitcoin transactions, which again, I’d be fine with that as a node operator. But as a node operator, I don’t necessarily want to store people’s arbitrary data that isn’t related to money. And so I think there is a reason to think of use cases here, in the sense that we could lose node operators if those node operators felt like their goodwill was being abused. So, I just wanted to put that out there as a take.

Gloria Zhao: Yeah, sorry, what I meant by “we” is as protocol developers. I don’t think that if you’re writing, let’s start with like consensus rules, right? I don’t think it would be appropriate to have consensus rules that as devs we impose on people. I mean, okay, sorry, how do I say this? Yeah, at the protocol level, I don’t think we should police based on use case. At the node operator level, I think, yeah, it’s totally an individual decision. If you want to change your node to ban anything you think looks like a jpeg, or any use case that you particularly dislike, I think that was what the last post was about, was policy as an individual choice.

But I don’t know that it makes sense to say, “Oh, this jpeg –” okay, something like child pornography is very black and white, but the types of decisions that are typically made by financial institutions, that police who gets to use money and who doesn’t, I mean, this is kind of how we think about it in Bitcoin, right? The types of decisions that they make are not really ones that I think are suitable for what we’re trying to do here, if that makes sense; so, difference between we as a protocol developer making decisions and we as individual node operators making decisions.

Dave Harding: I see somebody else wants to talk, so I’ll just go really quickly and just say, I don’t think we necessarily have the tools to block the things that I would want to block. I say child pornography; I don’t think we have the tools to block that at the consensus level. And so as protocol developers, we can’t really spend a lot of time thinking about that because we just don’t have the tools. But if we had the tools, I think it would be very easy to get support to block that. So anyway, I’m finished. Thank you, Gloria.

Mike Schmidt: We have a speaker request from user Oflow. Go ahead.

Oflow: Hey, what’s going on? Yeah, I actually agree with Gloria, and lots of love and lots of respect to you, Gloria, I appreciate what you’re doing. I like to look at it similar to a dollar bill. Obviously, this is a bad example, but it’s perfect for this situation. Anyone can have a dollar bill and choose to write over it and put anything on it. Obviously, some dollar bills that might be written on or might have beautiful art subjectively on it, but at the end of the day, it’s a dollar bill, it’s fungible, you’re able to go and spend it. So, that’s the way I would look at it. Once you start telling people that they can’t spend their dollar because it has a smiley face on it, that fundamentally messes with Bitcoin. That’s what I think.

Mike Schmidt: Thanks for that comment. Gloria or Murch, anything else you’d like to say before we tease the next post in the segment and move on?

Mark Erhardt: Yeah, I wanted to maybe have a comment, a personal opinion on the inquisition, what is it, the pictures?

Mike Schmidt: Inscriptions?

Mark Erhardt: Thank you, it’s been a very long week. We have the Lightning Summit in New York this weekend, I’ve been talking to people all day, every day, and sorry, my brain’s just fried! So, with the inscriptions that we’ve been seeing on the network, I think it’s totally fair that we focus on Bitcoin trying to be the digital currency of the internet, for being an attempt at creating a global currency, and we don’t really need to cater to every single use case. I think OP_RETURN, for example, being introduced as a means to make sure that there is a way for people to publish data, a small amount of data, without having too many consequences for other network resources, is a good means of preventing it to happen in a worse case or trying to mitigate because we cannot prevent.

But on the other hand, I’m also thinking that I am completely unconvinced that having a platform to do BRC-20 tokens is a good thing. I don’t think that it serves our use case to achieve a global currency. The harsh truth though is it’s really hard to block these sorts of proposals in an effective way, because we can sure block this incantation with which the data is pushed to the blockchain, but then they’ll just come up with another one, and then we’re just going to get into an arms race, a game of Whac-a-Mole, where you just block specific uses. And then eventually, we come to a point where you just cannot have an open scripting system, and where people can have maybe brilliant new ideas of how we can build a second-layer protocol to have a scaling technology with which we can get the currency of the internet use case better facilitated.

So, we do want to have this open scripting system, we do not want to play Whac-a-Mole, so what can we really do as protocol developers to curb this use case? Well, one thing we can do is to protect the growth of the blockchain and to basically have everybody grow their adoption against this very fixed limit and just have use cases price each other out, and hopefully that makes the use case of currency survive, because money has a very high density of value for low amount of data. And hopefully, stuff like writing a series of 8-bit graphics to the network does not have the same value density. But I see a few comments. Maybe Robin?

Robin Linus: You mostly said all the things that I just wanted to say. First of all, it’s impossible to permit it. And second, the only way to really prevent it is to price these use cases out with higher value use cases. The only thing I wanted to add is that I think the best way to do that is to increase the network effects, which is, in the end, the number of users. And I personally see no way onboard users in a frictionless way, other than adding sidechains like BIP300 and stuff like that. I think that’s the best solution to add enough people so that the monetary use cases become so valuable that they price out all the inscription things.

Mike Schmidt: Oflow?

Oflow: Yeah, so I like to look at Bitcoin for what it’s functioning as, and I see it as a settlement layer. And I like to compare it to one of the biggest settlement layers that we have in the world today, which is Fedwire. And yes, Fedwire is settling trillions of dollars per day, and Bitcoin literally can do that; the transactions per second (TPS), there is literally a small difference in TPS. And I agree with Robin in that regard – nice to see you here – that essentially the more adoption that we bring to Bitcoin, essentially the more funds that get settled on that settlement layer, and pricing out arbitrary data is the way they go about it, instead of specifically trying to change the protocol in a way where we might specifically damage it, or try and limit it from a consensus level, because what’s being done is not out of consensus, it’s literally in consensus.

Even if we look back at Satoshi, Satoshi literally put arbitrary data into Bitcoin, not that what Satoshi does is the defining factor of Bitcoin, but specifically it has been done before and it’s in the history of Bitcoin to do it.

Mike Schmidt: We have another speaker request here from Bitcoin Sikho.

Bitcoin Sikho: Yeah, hey guys, I’ve got a question for Gloria. You mentioned that to protect the network, we need to introduce policies. So, what sort of policies are we talking about? Would there be like a dust limit on the transaction, or what exactly can we look forward to, when you say policy changes to curb unwanted use of the network?

Gloria Zhao: Oh, yeah, I was mostly referring to current policy, such as exactly, like the dust limit. So for example, let’s imagine there was no policy and you could broadcast a maximum consensus, like block size transaction, that just creates as many zero value UTXOs as you can fit, and that costs nothing and you just do that over and over and you blow up the UTXO set. So, dust limits say, “There’s a minimum value on –” sorry, what’s the list name? nValue on outputs that you need to put on transactions in order for them to relay, for example. Murch has a hand raised.

Mark Erhardt: Yeah, I was going to mention, we have a link in the newsletter that links to a Gist by instagibbs, where he goes over the Policy Zoo. And what he goes into is, he gives a list of all the policies that we currently have active on the network, and he categorizes them as in what motivations they have. So he looks at, is this to protect individual nodes against DoS attacks; is this for security where transactions that have certain properties can mess with the network for no good reason; is this to protect upgrade hooks or to…? Anyway, so there’s a link in there that you can look at for an overview of the current policies.

In general, I think we choose to use policies when we cannot introduce a consensus rule because potentially there could exist transactions that were pre-signed for which the keys were destroyed, that rely on being able to be committed into blocks eventually at, I don’t know, 20 years later. And if we now forbid opcodes that were live at some point in the network, we would prevent them from ever confirming their transaction. So, we cannot prevent people from using previously acceptable opcodes, but we can discourage their use on the network because, for example, they are really costly to validate for nodes, or they just are huge in the UTXO set, like their multisig, for example. I see there’s more speakers again.

Bitcoin Sikho: I have a follow-up question, sorry if you don’t mind. How do you implement these policies; is it like for consensus, obviously you either need the miners on board or the nodes on board? So, how does the policy get implemented; is it the devs just vote on it and then just release it like an update?

Gloria Zhao: Okay, so I think policy changes relatively infrequently, but the process is not just the devs decide on something and then push it. I think typically the process is you post to the mailing list, you air it out, you talk to any application that might possibly be using this field. So for example, if I’m trying to ascribe value and policy to version #3, I will go and see if anybody else is using that. And if somebody is, then I don’t want to invalidate their thing, so I’m not going to propose that. But yeah, you socialize it as best you can, and then you propose it, and then you can put it behind a flag, I don’t know. But yeah, it’s kind of in the middle. It’s not like you need all the miners to be on board. If you were to add a policy that causes them to lose money, I think they would probably, hopefully say something and say, “No, I don’t want to run this”. But yeah, it’s something in between just pushing it and getting everybody on board.

Mike Schmidt: Robin?

Robin Linus: I just want to ask, there is no policy to prevent inscriptions; we can only make it more expensive and more complicated for developers, but we cannot really have any kind of effective policy that would really prevent inscriptions, right?

Mark Erhardt: I mean we could, for example, reduce the acceptable size of input scripts, but again, we do want to be able to have a flexible scripting system, we afford that to ourselves. Putting in arbitrary limits on things may prevent us from using it in other ways later. So, really stamping down on all of those errant block space demand increasers feels like potentially a problem for the future.

Gloria Zhao: It feels like something that’s in witness data. Maybe this is a hot take, but it feels like something in witness data and/or something that is OP_RETURN, where you don’t store it perpetually, and you might be able to throw it away, and you don’t have to demand everyone download it when they bootstrap. Stuff like that is almost like, would very much prefer people using that if they’re going to do it. I guess this is my whole point. If it’s a choice between stuffing it into a bare multisig, and stuffing it into witness data, I think it’s pretty clear from the perspective of node resources which one we should prefer.

Mike Schmidt: Oflow, do you have another comment?

Oflow: Yeah, this is actually directed towards Gloria. What do you specifically think about upgrading Bitcoin script basically to Simplicity; and what type of effects do you think that would have on Bitcoin, adversely or positively, which the positives are probably more obvious than the negatives, so more emphasis on the negatives?

Gloria Zhao: I think I am vastly less qualified to answer this than someone like Murch or Dave Harding, so is it okay if I pass it on to them instead?

Oflow: Sure.

Mark Erhardt: So, I think that Simplicity is an interesting way of introducing a lot more scripting flexibility that is much easier to prove correct and to also program in than we have with our current script system. The current script system is fairly arcane, has some weird behaviors. I think it’s getting a lot better already with the introduction of miniscript, because that makes it much easier for humans to reason about and to express exactly the conditions that they want to encode. With Simplicity, that would be supercharged, because Simplicity would be a much more powerful language, yet we would be able to formally verify what exactly the outcomes of a Simplicity script could be.

My understanding is that we would be introducing that as essentially a new version of script for tapleafs. So, it could be soft forked in, it would be fairly easy to do so, we could have very strong guarantees about what you can do with it, and I would hope that we would essentially be able to write cooler smart contracts for how we use our digital e-cash. But the danger and downsides might include that it also becomes a lot easier and more powerful to do fancy altcoins on top of Bitcoin. So, what I really would not like to see Bitcoin become is yet another altcoin casino like Ethereum, where people are just trading a new shitcoin by the hour that gets traded back and forth. I do see some use for, say, colored coins like stablecoins, where people need to express value in their local currencies and perhaps do not have the stomach to deal with the current volatility of Bitcoin. But yeah, the danger of having a more powerful scripting system would mean that we also invite the DeFi space to build more on top of Bitcoin, and I sometimes wonder whether that’s something we want or not.

Mike Schmidt: Robin, maybe one last comment and we can move on to the Stack Exchange.

Robin Linus: Yeah, I just wanted to say that Paul Sztorc’s pitch is always that if we had sidechains, then we could kill all altcoins, and Simplicity would enable sidechains because it would enable two-way pegs.

Mark Erhardt: But do we want that? Because even then, the sidechains will increase traffic just to perpetuate the existence of the sidechain on Bitcoin. We will have more use cases that compete with our use of Bitcoin as a currency system. It is hard for me to assess whether the introduction of broad sidechain capabilities is going to have a beneficial outcome for Bitcoin. And on the other hand, I think that, for example, Liquid introduced a lot of ways of how you could have currencies or tokens/native assets on Liquid, and I’ve seen very little uptake of that. Now, people might say that that is due to the performance of Liquid marketing or something. But I just don’t see, it’s not obvious to me that that is an outright benefit to Bitcoin, but please feel free to push back one more time on me.

Robin Linus: Well, the best argument why people are not doing much shitcoin casino things on Liquid is that bitcoiners just are not that much into gambling. But yeah, it’s a different discussion. My entire point was that sidechains in general, they can kill all the old shitcoin narratives because there cannot be any new shitcoin narrative that could promise something that you could not do as a Bitcoin sidechain, and I think that that is a good thing in general.

Mike Schmidt: All right, perhaps this is a good opportunity to move along the newsletter. I think we had some good discussion there. People like talking about policy and people like asking Gloria questions. So, Gloria, thank you for being here. Next section of the newsletter is Selected Q&A from the Bitcoin Stack Exchange. So, once a month we pick out some interesting questions from the Stack Exchange and go through those, and this month we have five of them.

Why do Bitcoin nodes accept blocks that have so many excluded transactions?

The first one is, why do Bitcoin nodes accept blocks that have so many excluded transactions? And maybe a bit of background to this question is this user, commstark, who asked the question is referencing a metric called Block Health, which I think is provided on the website as a tool to see if the block that came in matches what a particular node expected that block to contain in terms of transactions. So, has some metrics around this that they evaluate blocks against what they expected, what their mempool expected; and there’s also an additional tool provided by 0xB10C, called, that does something similar, that shows how many transactions were missing or extra transactions that were included in a block compared to what that node or series of nodes thought were going to be in that block.

So, the question here is, if there’s blocks that are being mined that don’t include certain transactions that were expected to be there, why wouldn’t we just block, or I guess not accept that block from that mining pool or that miner, because maybe they’re censoring transactions? So Pieter Wuille answered this question pointing out that, essentially the variance in different nodes’ mempools related to transaction propagation kind of makes it such that you can’t really be sure that a mining pool or a miner is censoring transactions. Murch, I see your hand up. Do you want to add to that?

Mark Erhardt: Yeah, I think one thing that’s interesting to point out here is that we didn’t really have good tools to watch the difference between block templates, expected block templates, and the actual blocks being published on the network. I know, of course, 0xB10C has had the for a while already, but with the advent of it being added to, it just became a lot more visible. So I think it’s funny how the visibility of metrics like this pushes curiosity of people on why we’re not able to prevent that. I see Harding wants to chime in.

Dave Harding: I just want to quickly disagree with Murch. I think we do have the tools for that. If you enable debugging for compact blocks on Bitcoin Core, it’ll tell you what it got from the nodes, on high-bandwidth nodes. So, I’m just looking at my debugging log right now. And so, I have a recent block here. It says, “Successfully reconstructed block… with one transaction prefilled”, so that’s what we received from the high bandwidth here, “3,214 transactions from the mempool, including at least zero from the extra pool, and then 15 transactions requested”. So my node requested 15 transactions that it didn’t have from that block when it received. So, I just wanted to point out that we did have that tool, but Murch is right that these websites are making it more accessible to regular users.

Gloria Zhao: Well, we don’t have the logging to see if something was missing. So we don’t regularly build block templates, for example, and then check to see what was missing in the actual block. I’m sorry, I’m just being a contrarian, I guess.

Mark Erhardt: Although I also just talked to some people yesterday and we talked about how that would be a useful thing to keep track of in order to, for example, assess the quality of our mempool to do feerate estimation. But getting back to my earlier point, so on the one hand, I think it’s funny how the curiosity is driven by just making this publicly visible. Thank you, Harding, for correcting that we couldn’t get it as in other ways previously. But the other thing is, transaction relay on the network is a best-effort thing, so we can never tell whether other nodes actually had received the transaction before, unless we gave it to them directly ourselves. And so, if they don’t include that transaction, it might have been for benign reasons: they just restarted their node, they weren’t online when this transaction made the rounds, or things like that.

So, if we required other nodes to be homogenous with our mempool, we would essentially have a consensus protocol we had to run on the content of the mempool, rather than the blocks being published being our consensus mechanism with which we agree what the order of transactions on the network is. So, it’s just completely impractical that we have agreement on the content of mempools and therefore we cannot expect people to have the same block templates, I think. Oflow, what’s up?

Oflow: Question, why don’t we have something like Dandelion in Bitcoin?

Mark Erhardt: That’s a good question. So, precisely the reason for Dandelion was that it introduced some new DoS vectors, because when you pretend to everybody else that you haven’t seen a transaction yet, let’s say we have ten peers and eight of them submit the same transaction to us via Dandelion, we have to pretend to each of the other ones that we haven’t seen it yet until we see it on the open network. So, we essentially get a situation in which we have to keep up to a complete mempool for every one of our peers that we pretend is not known to everyone else, so we basically get a function or we open a pathway for other nodes to write to our memory directly. And there were this and a few other issues how it could turn into a DoS vector, that could not be mitigated by discussions on how to improve the protocol.

I think that there is currently work by Vasil Dimov on a single-shot submission to a Tor node. The idea here is if you want to submit a transaction to the network instead of giving it to your peers and potentially revealing to the peers that you’re the source of the transaction, because you’re the first one that tells them about it, you would connect to a random node on the Tor network, only give the transaction to that node with a fresh connection to the Tor network, and then disconnect from the Tor network again, and then hope to see the transaction on the open network after as a way to confirm that it has been successfully broadcast.

That way, we could get sort of a single hop Dandelion, where we just make a very private first connection and a lot of the issues around when to submit it to the broader network, to keep separate mempools for each of your peers for the Dandelion transactions versus regular transactions, they don’t apply to this very simple approach.

Why does everyone say that soft forks restrict the existing ruleset?

Mike Schmidt: Next question from the Stack Exchange was, why does everyone say that soft forks restrict the existing rule set? And in looking at more details of the motivation for this question, it seems that this person is seeing that seemingly, you can still spend in the “old way”, even after a soft fork, so what exactly is being restricted? And so Pieter Wuille answered this question and provided the examples of the taproot and segwit requirements that were added.

I think that the takeaway here is that it is restricting the rules and making tighter rules, but it’s not restricting common types of transactions or spends or outputs. It’s restricting, ideally, some format of a transaction that hasn’t been used or has been used sparingly so that it has to adhere to the new rules. Go ahead, Murch.

Mark Erhardt: I think this ties very nicely into our Waiting for confirmation series post today, because this is an upgrade hook that has been used. We had essentially already put a fence around native segwit transactions of higher versions. So we’ve had v0 and native segwit for a while since segwit came out. But v1 through, is it 15 or 16? I think 16, are consensus valid and unencumbered by rules, but policy disabled. So, we do allow sending to outputs that use the new versions, but we prevent inputs from using the new version. So, the restriction that we add here is, instead of having no rules applied to v1 native segwit inputs, we now expect that they fulfill the template of taproot transactions. And that is a restriction from no encumberment to only the rules specified in taproot, and that’s how we get the restriction of rules here.

Why is the default LN channel limit set to 16777215 sats?

Mike Schmidt: Next question from the Stack Exchange is, why is the default LN channel limit set to 16777215 stats? We have Vojtěch, who explained the history around that limit, and then the change to wumbo channels at some point, and also linked to our Optech’s large channel topic for more information, which includes a quote from Rusty saying that people are going to lose money using this new technology, and he would sleep better if he could pay you back with a beer or coffee, with the amount that was potentially lost with this new protocol. That was an early quote of his. and I think since then, it was 2018, allowed these wumbo larger size channel sizes. I thought that was interesting that we got a topic reference from the Stack Exchange. Murch?

Mark Erhardt: Yeah, it’s funny how 42 millibitcoin is the cost of a beer, though.

Mike Schmidt: Maybe not anymore!

Mark Erhardt: Yeah, not quite, I mean it’s like $1,200! But yeah, essentially Lightning is fairly complicated. It’s extremely simple if you think about what the core concept is, and it only uses the idea that you can spend an output in two different ways, either locked by a hash or locked by a time. And then on the other hand, well, we have the Lightning Summit here this week, and we had 30 or so Lightning developers yesterday at our New York BitDevs, and they’ve been working, people have been working on Lightning for eight years.

This simple idea and just trying to work out all the engineering challenges around that is keeping about 40, 50 people full-time occupied, working on three, four, maybe five Lightning implementations now. So, the foresight of Rusty to say, you know what, people are going to use this before it’s ready, and let’s limit how much funds are on the line when people are recklessly storming the network, seems pretty foresightful at this point.

Why does Bitcoin Core use ancestor score instead of just ancestor fee rate to select transactions?

Mike Schmidt: Next question from the Stack Exchange is, why does Bitcoin Core use ancestor score instead of just ancestor feerate to select transactions? And I know we talked about this briefly in our Waiting for confirmation series a few weeks ago on incentives. Gloria, how would you frame Suhas’ answer to the question? He seems to outline that it’s a performance optimization.

Gloria Zhao: Oh, so ancestor score, sorry, I didn’t prepare, but ancestor score is the minimum of your ancestor feerate and your own feerate. So, you can imagine a CPFP, you’re bumping your ancestor, so your ancestor feerate is going to be lower than your own feerate because you’re fee bumping your ancestors. Whereas, you can also imagine situations where, I don’t know, you’re spending your change output from a payment that was pretty urgent, but this new payment using your change output is not as urgent, so the child transaction actually has a lower feerate than the parent transaction. So in mining, there’s no point. If you look at ancestor feerate alone, it doesn’t make sense in that case.

But anyway, so we could still use ancestor feerate as the first sort, where you take the highest ancestor feerate, and then you take that one, and then you start adding those to the block and then updating things as you go, but that’s less efficient than using ancestor score, which is the minimum, because you’ll catch things like the child having a lower feerate sooner. I can go and read Suhas’ answer, but okay, maybe Murch has!

Mark Erhardt: There’s another thing here that is a little more subtle. So, in a straight line of transactions, or let’s say when one transaction has a tree of ancestors that is more complicated, for example a diamond or just two parents that both have a – let’s say you are spending from two CPFPs, then it is possible if they have overlapping ancestry for your own individual feerate to be lower than your ancestor set feerate. This is usually not easy to create, but it makes it fairly difficult to decide whether or not transactions should be included right now or not, because you can increase the overall ancestor set feerate by adding two ancestor sets together that individually would have a lower feerate.

So if you want to evaluate all of these situations conclusively, you spend more computation time and it’s just faster to opt. Well, even if you’re attaching yourself to multiple sets of transactions and increasing the overall quality of the package that way, we’re just not going to evaluate it that way because it takes more time and makes it more complicated. And so we default to, you can’t be better than your own feerate.

How does Lightning multipart payments (MPP) protocol define the amounts per part?

Mike Schmidt: Last question from the Stack Exchange has to do with multipath payments, which is a technique for splitting higher value HTLCs into many lower value HTLCs, that may be more likely to succeed when you route them through the network. And the question is, how does Lightning MPP protocol define the amounts per part? So, when you’re doing this splitting, is there some sort of mandate in this protocol that says you should use a certain size part or a certain algorithm to determine what those size parts should be? And René Pickhardt pointed out that there is no protocol specified or mandated part size or algorithm for picking those sizes. And he also points to a bunch of research, a lot of which was driven by his own research on the topic into payment splitting research, which I don’t feel like I can try to summarize in this discussion, but if you are curious, please check out that answer from René and review some of the literature on that.

Mark Erhardt: Yeah, maybe just one comment here. René has written, of course, what has become known as Pickhardt Payments, which indicates, or he has found an optimal solution to the flow problem there on how you should route payments and how you should attempt to route payments, and so he’s exactly the right person to answer that. My understanding is that it’s not the optimal solution to split into equal parts. And yeah, other than that, I will join Mike in asking you to read the source material if you want to understand all the details.

BTCPay Server 1.10.3

Mike Schmidt: Next section of the newsletter covers Releases and release candidates, of which we have one, and we have a representative from the BTCPay Server team to give us the highlights of this release. So, maybe, Pavlenex, you want to introduce yourself, maybe give a quick summary of BTCPay Server for people, and then a couple of highlights from this 1.10.3 release.

Pavlenex: Yeah, sure. Thank you so much for having me, I hope you guys can hear me well. So, yeah, I’m Pavlenex, I’ve been working in Bitcoin open source for six years now. I’ve been mostly involved in BTCPay Server as a janitor or a PM, however you prefer, and I’ve also been involved with Stratum V2 recently and a bunch of other projects, but let’s say BTCPay and Stratum V2 are my focus these days.

BTCPay Server, so for those of you who don’t know, it’s just an open-source self-hosted and free payment processor for anybody to use to accept Bitcoin payments without fees, without intermediary, on your own terms. I think it’s also a very important infrastructure project in Bitcoin. A lot of people build on top of BTCPay, we have a lot of projects built on top of it by using our stack or just using our API. So that’s, I guess, the short description of it. If anybody here does not know what BTCPay is, you can go to on our website and read more about it, or just send me a DM, I’m happy to answer any questions that you may have.

In terms of our releases, so this specific one that we released two days ago is 1.10.3. Unfortunately, it’s a minor release, which means a lot of boring work and a lot of fixes and bug fixes. But what may be interesting to hear is how we came up with this release, so I’ll tell you a very quick story. So, the team was in Prague for BTC Prague Conference. We had a booth there and a lot of people approached us with feature requests and simply to complain because as an open-source project, we don’t really keep a track of users, we don’t know how they use BTCPay Server or what problems they have. So, people just kept appearing in our booth and just reported bugs. So, then we realized that all of us needed to have notes, and then we took a bunch of notes.

Then once we were back from Prague, we tried to consolidate all that overwhelming feedback from people, but then we started organizing it. So, let’s try to fix things first before we ship new features. And that also I think shows the direction in which BTCPay Server is slowly going. We are maturing, we want to have core software, which is very stable, very high performance, flexible, but then we also want to have, let’s say, plug-in ecosystems so that people can build features on their own, in a way similar to what WordPress maybe is doing, even though some people may not like that model. For us, it’s been quite successful, I guess.

So yeah, this particular one, well, you can see just by reading through the release notes that we were heavily focused on fixing point-of-sale (POS) bugs. The main reason for this is that we had a person in Prague accepting Bitcoin payments in Paralelní Polis, which is like a co-working space for bitcoiners, maybe also crypto people. But they had, for that particular part of time, like seven days, they had over 3,000 transactions on BTCPay Server POS. So obviously, they had a lot of feedback. And for us, it was very interesting. I was always peeking around their shoulders, seeing how they use software, and then we identified a bunch of things.

So, most of those bug fixes are actually around improving the POS experience, fixing the NFC payments. And then we have a couple of others, like crowdfunding and a few others. But I don’t think that’s very important for people or interesting to listen. But you can go to our blog to read about our 1.10.0 release; I think you guys linked it already. And you can see some of the highlight features, I guess, there. But yeah, I will not bug you too much about BTCPay Server. I just want to say thank you for always including all of our releases, even though they may be boring. I really appreciate you guys, the work you do, and yeah, also how correctly you always report on the work we are doing, which means that you’re doing quite a lot of research to be able to convey all of the things that we are shipping. So, thank you for that.

Mike Schmidt: Thank you for those kind words and thanks for jumping on last minute within just a few minutes of us starting this Spaces. I was hoping somebody from BTCPay could join and you jumped on and you made it through an hour-and-a-half to get to each segment, so thank you!

Core Lightning #6303

Next section of the newsletter is notable code and documentation changes. The first one that we have here, actually a slew of Lightning-related PRs, but the first one is to Core Lightning #6303, which has a new command to set some config parameters dynamically, presumably without having to restart. This is somewhat related to another PR we covered about CLN configuration recently, in Newsletter #255, that helped with configuration specifically for passing configuration options to plugins when they are restarted. And I know that in that PR, they were setting the context for a wider sort of rework of their configuration setup. So this builds on that. Murch, any thoughts?

Mark Erhardt: Isn’t it funny how for some reason, all of these Lightning people are looking to have all their decks in a row recently?!

Mike Schmidt: Maybe there is some sort of event going on?!

Mark Erhardt: Man, it’s amazing!

Eclair #2701

Mike Schmidt: Next PR is to the Eclair repository, #2701, which now records the timestamps of when an offered HTLC is received and when it is settled. And so, this allows tracking of how long those HTLCs are pending, at least from that node’s perspective, and it can be a longer pending HTLC may be an indication that there is a channel jamming attack in progress. And also having that information, those timestamps, may also contribute to mechanisms which could help mitigate such channel jamming attacks. Murch?

Mark Erhardt: Yeah, we have talked a little bit about different types of jamming and mitigations in the past few months. So, just as a reminder, the researchers working on this topic generally distinguish between slow jamming and fast jamming, where fast jamming just means that you do a barrage of many payments in order to lock up all of the slots on a channel, whereas slow jamming is a way of just keeping a multi-hop payment open on the receiver end, not pulling in the payment for a long time. And especially with the recent block space demand spike, some of the Lightning implementations have been increasing their CLTV deltas, as in the time that each hop reserves on being able to close their HTLC out onchain in case that a payment doesn’t go through or a peer disappears – sorry, just the latter, not the former. And so the, I think that jamming is moving forward.

We have the idea of having advanced payments in order to pay for every hop, to pay a minuscule amount of satoshis to every hop for the opportunity cost of keeping an HTLC open. And on the other hand, we’re talking about local reputation of your own peers that if you work together with peers a lot and forward payments for them a lot, you may start to endorse payments that they have endorsed as coming from a good source as a means to protect at least half of your channel capacity and channel slots against slow-jamming attacks. And yeah, that’s just a short, small rundown on jamming again.

Eclair #2696

Mike Schmidt: Next PR is Eclair #2696, which allows users of Eclair to now specify fee prioritization using keywords like slow, medium, or fast instead of the previous option, which was specifying fee prioritization using a numbered block target of when the user would want the transaction confirmed. This fee prioritization applies for the funding and closing transactions, and you can configure those separately. The default setting for both, I believe, is medium for both the funding and closing, but you can configure different values for the funding versus the closing. And I took away from this PR that it’s not adding additional options, per se, but they’re trying to get away from block targets, and they’re not just simply adding additional ways to provide that fee prioritization.

Mark Erhardt: I think that’s a good thing. I think that the expression of trying to express the urgency of your transaction in a block target is inherently a weird UX. People either want to be in the next block or in the second next block; and after that, I think expressing it as count of blocks seems odd, because that’s not how people think about transactions. People want to have their transaction go through before noon or by next morning or by the end of the week or something like that and expressing it as slow, medium, fast is just a better way of going there.

LND #7710

Mike Schmidt: Next PR is to LND #7710, storing HTLC extra TLVs in Onion Blob Varbytes. And so TLV is Type-Length-Value record, and this allows spec upgrades to transmit extra fields in this TLV stream. Some uses for that extra data may be route blinding, and it can also be used for channel-jamming countermeasures. We also mentioned in the newsletter write-up that there could be other ideas for future features. And looking into the PR, another way this extra data could be used was for keeping track of local reputation information about a forwarded HTLC. Murch, any thoughts on this PR? All right.

LDK #2368

LDK 2368 allows accepting new channels created by a peer that use anchor outputs, but this does require the controlling program or individual to deliberately choose manually which to accept for each of these new channels. So LDK, as a library, isn’t aware of what non-LN UTXOs the user’s wallet controls behind the scenes. So, it uses this prompt to give whatever program is controlling the wallet, and potentially LDK, a chance to verify that it has the necessary UTXOs with sufficient value that could be required to properly settle an anchor channel on chain.

Mark Erhardt: Do you want to talk about anchor outputs a little bit?

Mike Schmidt: Sure, yeah, I know there’s a couple of PRs here related to anchor outputs for LDK.

Mark Erhardt: Right, so my understanding from yesterday’s BitDevs is that anchor outputs are moving forward quite a bit. So, anchor outputs help, of course, or let me take another step back. One of the issues that Lightning channels have is that the commitment transaction gets updated every time there is a state change of the channel. State changes happen either when a payment goes through the channel, both when the HTLC is created and the HTLC is removed; or when one of the two peers just starts talking to their counterparty and says, “Hey, I feel like the feerate’s changed a lot”, or, “I want to announce a new flag”, or generally want to change the features or parameters of the channel, then they would also re-announce the channel.

However, if for example, at that point, one of the channel partners is not present, or that hasn’t happened in a long time, it is very easy for the commitment transactions to have committed to feerates that are not current. And especially with the feerate spike we saw a while back, a bunch of channels were just stuck at having commitment transactions with feerates that were very low and underestimated, and by themselves the commitment transactions were not competitive to be included in blocks and vice versa. After you come down from a fee spike like that, the feerate may be set way too high and when you do publish a commitment transaction for a channel where the peer disappeared, you might be overpaying by magnitude.

So, anchor outputs generally allow you to move that decision on what feerate you might want to use to the time at which the commitment transaction is published. The commitment transaction now only has to meet the minimum dynamic mempool feerate, because we still need to be able to first submit the commitment transaction into mempools in order to be able to CPFP it, but then after that, the anchor output is available for you to attach a CPFP and to bring more fees in order to bump the parent transaction, the commitment transaction, the actual unilateral channel close that you want to perform, and your new transaction that bumps it.

So currently, there’s two anchor outputs on each transaction, one for each party, and they have gone to a length to make these anchor outputs have sufficient amounts that they will be cleaned up later. And I think they did that by making the commitment transaction have a CHECKSEQUENCEVERIFY (CSV) timelock, so either party can claim them after the commitment transaction is settled on the chain if they hadn’t used it for bumping yet. And then after a few blocks, it becomes ANYONECANSPEND, and people can just go and clean up those anchor outputs. And I think they are at 330 sets or something, so it should be economical to clean them up at low feerates later.

We had a speaker request or something, or did I miss something?

Mike Schmidt: I might’ve missed it, I didn’t see it.

Mark Erhardt: Okay, anyway, that was just a little rundown on anchor outputs, or maybe one more sentence. In the long term, of course, we would hope to transition to v3 transactions and ephemeral anchors, which further improves the situation, because now you only have to have a single output on it. The ephemeral anchor is ANYONECANSPEND but has no value itself, and we force people to – they can only publish a transaction with an ephemeral anchor if the ephemeral anchor is spent in the same package.

That’s at least the concept right now. Of course, this is all work in progress. And that would both make the transaction, the commitment transaction smaller, would fully move the funding of the commitment transaction to the time when it is published, and ephemeral anchors can be tiny because they have an OP_TRUE output, which is only 9 bytes. So, yeah, lots of movement in that area.

Mike Schmidt: Oflow, did you have a question?

Oflow: Yeah, I just missed the last thing. Can you explain the anchor again; what does that mean again?

Mark Erhardt: Sorry, in the interest of time, I think you can listen to the episode later.

Oflow: Yeah, thank you.

LDK #2367

Mike Schmidt: Well, Murch just gave a great overview of anchor outputs, and that was in relation to LDK #2368. And there’s also the LDK #2367, which makes anchor channels accessible to regular consumers of the API. This PR removes the config flag that was temporarily hiding anchor-related API calls from the public API, and so they’ve removed that. So, that’s accessible now to anybody using LDK who wants to do anchor channels.

Mark Erhardt: One thing that I missed was, especially with the spec summit currently, I think that the different implementations have been coordinating on anchor outputs, and there are at least two, I think, that have finished implementations now. So I think we’re moving to an anchor-output-based commitment transaction system more broadly now; it’s starting to get adopted, from the top of my head. I’m not really that plugged into Lightning.

LDK #2319

Mike Schmidt: Another LDK PR, #2319, which allows a peer to create an HTLC that commits to paying less than the amount the original spender said should be paid, allowing the peer to keep the difference for itself as an extra fee. Murch, why would we allow such a thing?

Mark Erhardt: Well, if the last hop, the actual recipient is good at leaving a little bit of the funds with the previous hop without the sender needing to know about that, you can do fun stuff like open a channel from – sorry, I think it’s useful in the context of loops, submarine swaps, where you are trying to pay the service provider a fee. And since it’s strictly opt-in, if the last hop forwards too little and the recipient says, “Well, that doesn’t match my invoice”, they can just decline it, and the last hop fails at claiming those funds. But if the last hop and the recipient agree, they can have an out-of-band agreement on some extra fees going to the last hop that weren’t present in the onion messages, because those are constructed by the sender, of course, and they don’t necessarily know that they’re under the hood paying both the last hop and the recipient.

So, yeah, I think it’s a building block for making stuff like fees for submarine swaps and splices and loop in and loop out and dual funding and all of those things easier to do, and it sort of is an alternative approach to the proposal of Thomas Voegtlin that we talked about last week, where he suggested that there may be two payments specified in a single invoice. I think that you can achieve, in some use cases, a similar thing by just letting the last hop collect a little bit of the money intended for the recipient.

Mike Schmidt: And I think another use case that I’m not sure you mentioned that we pointed out in the newsletter was the creation of just-in-time channels, JIT channels, and so there’s another use case there.

Mark Erhardt: Oh, yeah, that was the thing I was thinking of, or I was supposed to think of!

LDK #2120

Mike Schmidt: Next PR is LDK #2120, which adds support for finding a route to a receiver who is using blinded paths. And noted in the PR, this is blinded paths provided in BOLT12 invoices. And so, blinded paths also has a few other names, like rendez-vous routing, that we’ve used in the past, and that’s the technique to allow a Lightning node to send a payment to a node that is unannounced without learning where that node is in the LN network topology. And so, now that is now also supported by LDK, so LDK is really cramming here. Murch?

Mark Erhardt: Yeah, I was going to ask whether we should give an overview into that one too, but are we running out of time? We’re almost at two hours.

Mike Schmidt: I think we could probably skip it this go-around.

Mark Erhardt: All right, yeah, I think you got the gist of it anyway.

LDK #2089

Mike Schmidt: LDK #2089, adds an event handler that makes it easy for wallets to fee bump any HTLCs that need to be settled onchain. Quote from the PR, “Without having to worry about all the little details to do so”. Another piece that I saw from the PR discussion was, “While the event handler should in most cases produce valid transactions, assuming the provided confirmed UTXOs are valid, it may not produce relayable transactions due to not satisfying certain RBF mempool policy requirements”. And also noted, and related to that potentially invalid transaction, that, “While we may consider implementing this in the future, we chose to go with a simpler initial version”. Murch, did you get a chance to look at this one?

Mark Erhardt: Unfortunately, I’m unfamiliar.

LDK #2077

Mike Schmidt: Okay. Next PR is also to LDK, #2077, which is essentially a refactor PR that refactors a bunch of code that makes it easier to later add support for dual funded channels, which is exciting. I don’t have any comments from the PR on that one. Murch, anything there?

Mark Erhardt: Yeah, so I don’t know how familiar people are, but there are some interesting dynamics around the person or the user that opened the channel versus the counterparty, in who pays for fees. And so, in one side where this expresses is that when the two participants disagree on the feerates that commitment transactions have, they have slightly different interests because some of that is always paid by one side. And from what I understand, Dunxen is just moving here to more clearly track what type of channel it is; is this one where we open the transaction or is it one where the other party open it? That makes it easier to have the right code routines to negotiate and to keep track of stuff, and yeah, in light of dual funding, to maybe have a separate category for that as well.

Libsecp256k1 #1129

Mike Schmidt: Last PR here is to Libsecp repository, #1129, implementing ElligatorSwift technique. Murch, you did the write-up for this, I think you’d be better suited to give a summary of what is ElligatorSwift and how it fits into some broader initiatives?

Mark Erhardt: Yeah, sure. So, ElligatorSwift is a technique of essentially encoding a public key, an ECDSA public key, in a 64-byte value that is indistinguishable from random data. And so, one of the things on how nodes on it – well, Bitcoin nodes on the network are very easy to fingerprint because they send Bitcoin traffic and all traffic is currently sent in the clear on the network. There has been a long-time initiative in trying to encrypt all traffic on the Bitcoin network. This is currently moving forward in form of BIP324, the v2 P2P protocol, in which all traffic will be encrypted.

This still means that it’s probably fairly easy for ISPs and other nodes along the route in the internet to tell that people are participating in Bitcoin traffic because, well, a node was found and suddenly the traffic of that kind spikes, and so forth. But in the long term, not only do we want to encrypt all the traffic, but there is the thought of allowing nodes to authenticate with each other. And ElligatorSwift is here used to, actually I think I’m jumping ahead too far. ElligatorSwift is used to establish the handshake for the BIP324 P2P messaging. And instead of telling at the handshake, “Hey, here’s my pubkey that I want to use to establish an encrypted session with an ECDH”, we send 64 bytes of random-looking data and it becomes indistinguishable. Sorry, did I get everything? Am I missing something big?

Mike Schmidt: No, that’s great. Yeah, I mean, it’s pretty cool that this got merged. Obviously, it’s another step in moving forward with BIP324, and it’s pretty cool that they’ve done this in a way that it looks totally random to an onlooker. So, pretty impressive technology.

Mark Erhardt: Do let me jump a little bit ahead, though. So, once we have all traffic encrypted, we would like to authenticate each connection, or at least pretend to authenticate each connection, to make it really hard to man-in-the-middle attack. And while it’s hard to show or to pretend that we’re not Bitcoin traffic, I think it will be fairly easy for other protocols to pretend that they are Bitcoin traffic. And this could, for example, help other P2P networks to hide traffic that looks like Bitcoin traffic; and it will make it easier to, for example, if you have a light client that you want to be sure is talking to your own full node, to authenticate that you’re talking to your full node and to authenticate from the full node’s perspective that the light client is the one that you’re talking to.

So, there is a very nifty, cutting-edge cryptography research paper coming out at some point that describes this technique that we’re working on. I think it’s been described, a counterparty has been described before, but yeah, there’s some really cool stuff that’s just moving on a more year-to-year scale that’s going on and hopefully coming out; well, this decade!

Mike Schmidt: And if you’re curious a bit about this authentication that Murch mentioned, we discussed it a little bit in our Newsletter #255 Recap, in our discussion with Matthew Zipkin, I think it was in the Bitcoin Core PR Review Club section, where we were talking about one of his PRs and brought this topic up. So if you’re curious, you can jump to that section of that podcast and listen further if you’re curious what the use cases might be there. Murch?

Mark Erhardt: I think I said the wrong word. I’m talking about countersign and we do have an Optech topics page for countersign. So, if you are interested in the mechanism that is being proposed for how we will do authentication on the encrypted v2 P2P transport protocol, that would be the page that you’re looking for.

Mike Schmidt: Any announcements before we wrap up, Murch?

Mark Erhardt: Yeah, I have to fill my own bags again. We had a lot of Lightning people in our office this week. We sat down with Rusty for the Chaincode podcast, and with Rusty we talked more about what are all the important things that Lightning developers are working on; and the other one is we sat down with Elle and Oliver from LND to talk about the situation with simple taproot channels where funding outputs for Lightning channels. We will hopefully soon be moving towards using taproot outputs as the funding outputs, and there’s a lot of discussion still around the exact details of that.

As we’re speaking, the Lightning Summit is discussing this and other topics for the spec, and we picked the brain of Elle and Olly a little bit on that, and those episodes of the Chaincode Podcast will be coming out sometime in the next couple weeks and I think they’ll be really cool.

Mike Schmidt: Excellent. Yeah, thanks, Chaincode Podcast is a great podcast. So, if you’re a listener of our Optech Recap Podcast, you would definitely find value in those discussions, so I encourage you to subscribe to that feed as well. Well, thanks to my co-host Murch for a great marathon two hours this week. We had some great guests. Thank you to Gloria, Robin, Dave for jumping in, Oflow for some questions, and also for Pavlenex for representing BTCPay. And we’ll see you all next week. Cheers.

Mark Erhardt: And Bitcoin Sikho, and yeah, thanks, was a great episode. See you soon.